Assessing the Quality of Offsets

Ing. Vaclav Kurel
November 27, 2022
Climate and carbon credits

Offsets have historically had a bad reputation. Some critics call them "indulgences" while others disparage them as "not solving the real problem". But what is the reality? Is there such a thing as a quality offset and a poor quality offset? And how do you tell them apart in a gradually expanding range of products and services?

The push for corporate environmentalism is not just a recent development. As far back as the beginning of the millennium, companies, individuals and various groups in the West were buying offsets to balance the negative environmental impact of their activities. Often they did so with good intentions and invested in a meaningful project. In some cases, however, much of the money went to waste, calling into question the whole concept of offsets. It is in these times of intensifying climate change, when it is particularly important to be able to distinguish between good and poor quality offsets.

The main idea behind carbon credits, in the form of 'offsets', is that by purchasing them, a company can compensate the carbon dioxide emissions that its activities directly or indirectly cause. This is where the first problem can arise. When it is just offsetting emissions from their direct activities, in simple terms from their own chimney. These emissions are under the company's control and should be eliminated by making savings or switching to a different technology. If a company uses coal as a heat source, they should replace it with an alternative source as soon as possible. However, alternative low-emission technology may not always be available today or may be extremely expensive and difficult to use. In that case, my view is that it is better to use the offset than not to address the carbon footprint at all. It is the same as someone needing to get from Europe to the US. Either they can take a long sailing trip across the ocean, or they can buy an offset to compensate the carbon footprint of a plane trip, such as Lufthansa offers. Similarly, they can offset a car trip for gasoline, which for example Shell in Canada offers.

If an individual or company purchases an offset in a sincere effort to reduce their carbon footprint, they should still verify that the offset is of sufficient quality. Quality has four main components. First and foremost, a quality offset credit must represent at least one metric ton of additional, permanent, and non-displaced removal of CO2 from the atmosphere. This is called Carbon Dioxide Removal (CDR). Second, a quality offset credit should come from activities that do not contribute significantly to social or environmental damage. Third, the offset program should be certified and audited by an independent authority according to international standards, such as Verra. And fourth, the co-benefits that the project brings beyond carbon capture are assessed. These can be particularly important for CDR projects built on natural mechanisms, thus increasing their value. However, these three criteria are primarily assessed: additionality, permanence and leakage.

Additionality: Would carbon sequestration have occurred without offset support?

An offset carbon offset program has value only if it can be shown that it would not have occurred without offset financing. For example, tree planting or an increase in soil carbon due to a shift to regenerative agriculture would not have occurred. Thus, for example, reforestation that a forest owner is legally obliged to carry out after clearing the original forest cannot be reported. Similarly, measures that have been largely financed by state subsidies should not be included in the offset project.

It is essential that the baseline from which the amount of carbon sequestered and stored is calculated is always carefully established.

Durability and risk: How long will the captured carbon be stored outside the atmosphere?

CDR projects are divided according to the duration of carbon storage into short-term (less than 100 years), medium-term (100 to 1000 years) and long-term (more than 1000 years). The longer the period of carbon storage outside the atmosphere, the higher the value of the project.

The largest volumes of offsets today are generated in tree planting and soil carbon sequestration. These projects are labeled as short-term because carbon removal is inherently ephemeral in natural ecosystems, unlike engineered solutions that can store carbon over the long term.

Offset issuers are therefore now using so-called 'buffer stocks' from which they can replace tonnes of carbon that are returned to the atmosphere (for example, as a result of forest fires, illegal logging or ploughing up organic-rich soils). Equally, however, issuers of offsets should apply strong measures to minimise the risks of leakage back into the atmosphere.

Offsets: won't this cause emissions elsewhere?

Some projects unintentionally shift emissions from one geographical area to another (even internationally). Typically this happens when a forest is planted somewhere or biomass is grown in a field to produce biogas, reducing food production in that location which leads to clearing forests for more agricultural soil. These potential negative consequences of the project need to be quantified and subtracted from its benefits.

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